This means income earned from various forms of investments such as rental income are usually included in the determination of the 3.8% Medicare Surtax, so long as it is not earned during the ordinary course of trade or business.

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The ordinary course of a trade or business exception is inapplicable because the rents are not derived from a trade or business and will therefore be subject to section 1411.

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In order to be excluded from the 3.8% Medicare Surtax altogether, taxpayers who are real estate professionals must also show that the rental real estate income was derived during the ordinary course of a trade or business.

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